24 Oct Too volitile to float….locking bias
Mortgage bonds had a nice technical bounce higher. This was an encouraging sign, as a break below support would have likely notched mortgage rates another 1/8% higher. Again, bonds are showing strength in spite of continued stamina in the stock market. Speaking of stocks, they started the day pointed down but quickly turned modestly positive for the day. Bonds could very well remain neutral to weak until later next week when the Fed speaks. With many Fed members softening their views, there may be a delay as to when they decide to increase short term interest rates. A few weeks ago it was almost a sure thing that they would make a move by mid-2015. However, that is now in question. It could now be a longer time frame before we see a Fed Funds increase. That is good news for the mortgage market, and may be an indication that lower rates will be in for a while.
Just when Ebola fears were starting to subdue, it was reported that a doctor who was treating Ebola patients in Africa contracted the disease and brought it back home to New York City. Apparently, he traveled on a taxi, as well as the subway, and went bowling. Now there are many known and unknown people who may have been exposed to this terrible disease. This could add additional fear to the market, which may increase the volatility we are currently experiencing.
As long as the stock market continues its advance higher, the potential for gains in the bond market will likely be minimal. Given the level of volatility in the markets, we feel the safe play is to continue with our locking bias. As long as we hold above support, there is no need to rush to lock at the moment. However, if you choose to float, watch the markets closely as volatility is high and changes can happen quickly.